Question 1

Which of the following purchases would be counted as a final good in the GDP calculation?

Accepted Answer

A)  A family's purchase of a used car. 
B)  A speculator's purchase of 100 shares of Apple Computer stock. 
C)  A deli's purchase of bread for making its sandwiches. 
D)  A business's purchase of new office equipment. 
A)  A family's purchase of a used car. 
B)  A speculator's purchase of 100 shares of Apple Computer stock. 
C)  A deli's purchase of bread for making its sandwiches. 
D)  A business's purchase of new office equipment.

Question 2

In an economy with persistent inflation,

Accepted Answer

A)  real GDP will grow faster than nominal GDP. 
B)  nominal GDP will grow faster than real GDP. 
C)  nominal and real GDP will grow at the same rate. 
D)  nominal and real GDP will both fall. 
A)  real GDP will grow faster than nominal GDP. 
B)  nominal GDP will grow faster than real GDP. 
C)  nominal and real GDP will grow at the same rate. 
D)  nominal and real GDP will both fall.

Question 3

Exhibit 11-9 GDP data (billions of dollars)
 $$\begin{array} { | l | r | } 
\hline \text { Personal consumption expenditures } & \$ 4,750 \
\hline \text { Exgarts } & 810 \
\hline \text { Govemment spending } & 1,400 \
\hline \text { Social Security taxes } & 600 \
\hline \text { Depreciation } & 450 \
\hline \text { Indirect business taxes } & 550 \
\hline \text { Imparts } & 850 \
\hline \text { Gross private domestic investment } & 900 \
\hline \text { Corparate income taxes } & 200 \
\hline \text { Persanal taxes } & 800 \
\hline \text { Corporate profits } & 50 \
\hline \text { Transfer payments } & 700 \
\hline
\end{array}$$
-In Exhibit 11-9,disposable personal income (DI)equals:

Accepted Answer

A)  $5,810 billion. 
B)  $7,710 billion. 
C)  $5,910 billion. 
D)  $5,310 billion. 
E)  $5,060 billion. 
A)  $5,810 billion. 
B)  $7,710 billion. 
C)  $5,910 billion. 
D)  $5,310 billion. 
E)  $5,060 billion.

Question 4

New residential housing is counted in GDP as a(n):

Accepted Answer

A)  durable consumption good. 
B)  household durable good. 
C)  investment good. 
D)  inventory expansion. 
E)  long-term durable good. 
A)  durable consumption good. 
B)  household durable good. 
C)  investment good. 
D)  inventory expansion. 
E)  long-term durable good.

Question 5

Disposable personal income:

Accepted Answer

A)  includes personal income taxes. 
B)  excludes personal income taxes. 
C)  excludes transfer payments. 
D)  is income spent for personal items such as homes and cars. 
A)  includes personal income taxes. 
B)  excludes personal income taxes. 
C)  excludes transfer payments. 
D)  is income spent for personal items such as homes and cars.

Question 6

Which of the following activities would be calculated as part of GDP accounts?

Accepted Answer

A)  Drug trafficking. 
B)  Money laundry. 
C)  Prostitution. 
D)  Purchasing plastic surgery. 
E)  Burglary. 
A)  Drug trafficking. 
B)  Money laundry. 
C)  Prostitution. 
D)  Purchasing plastic surgery. 
E)  Burglary.

Question 7

If exports rise and imports fall,then:

Accepted Answer

A)  GDP will increase. 
B)  GDP will decrease. 
C)  GDP may remain unchanged. 
D)  net exports will fall. 
E)  transfer will rise. 
A)  GDP will increase. 
B)  GDP will decrease. 
C)  GDP may remain unchanged. 
D)  net exports will fall. 
E)  transfer will rise.

Question 8

Exhibit 11-8 GDP data (billions of dollars)
 $$\begin{array} { | l | r | } 
\hline \text { Indirect business taxes } & \$ 600 \
\hline \text { Depreciation } & 950 \
\hline \text { Change in business inventaries } & 50 \
\hline \text { Compensation of employees } & 5,400 \
\hline \text { Corparate profits } & 700 \
\hline \text { Durable goads } & 600 \
\hline \text { Expurts } & 100 \
\hline \text { Social Security taxes } & 360 \
\hline \text { Transfer payments } & 300 \
\hline \text { Fixed investment } & 950 \
\hline \text { Government 5pending } & 900 \
\hline \text { Imparts } & 150 \
\hline \text { Net interest } & 500 \
\hline \text { Nondurable goods } & 2,000 \
\hline \text { Persanal taxes } & 1,000 \
\hline \text { Rental income } & 200 \
\hline \text { Services } & 4,000 \
\hline
\end{array}$$
-In Exhibit 11-8,and using the expenditures approach,compute gross domestic product (GDP).Which of the following is correct?

Accepted Answer

A)  $8,500 billion. 
B)  $8,400 billion. 
C)  $7,400 billion. 
D)  $8,650 billion. 
E)  $8,350 billion. 
A)  $8,500 billion. 
B)  $8,400 billion. 
C)  $7,400 billion. 
D)  $8,650 billion. 
E)  $8,350 billion.

Question 9

Real GDP means GDP:

Accepted Answer

A)  valued at prices in a base year. 
B)  that does not change from year to year. 
C)  corrected for changes in quality. 
D)  valued at prices at which goods are actually sold. 
A)  valued at prices in a base year. 
B)  that does not change from year to year. 
C)  corrected for changes in quality. 
D)  valued at prices at which goods are actually sold.

Question 10

In the circular flow model,money flows from the business sector to the household sector through the:

Accepted Answer

A)  product market. 
B)  capital market. 
C)  goods market. 
D)  services market. 
E)  resource market. 
A)  product market. 
B)  capital market. 
C)  goods market. 
D)  services market. 
E)  resource market.

Question 11

Exhibit 11-3 Expenditure approach
  
-As shown in Exhibit 11-3,net exports are:

Accepted Answer

A)  $75 billion. 
B)  $100 billion. 
C)  $20 billion. 
D)  $120 billion. 
A)  $75 billion. 
B)  $100 billion. 
C)  $20 billion. 
D)  $120 billion.

Question 12

Which one of the following statements is true in the four-sector circular model?

Accepted Answer

A)  Money flows from government to households for taxes. 
B)  Money flows from foreign economies to households for exports. 
C)  Money flows from government to firms for goods and services. 
D)  Money flows from firms to foreign economies for exports. 
E)  Money flows from households to foreign economies for resources. 
A)  Money flows from government to households for taxes. 
B)  Money flows from foreign economies to households for exports. 
C)  Money flows from government to firms for goods and services. 
D)  Money flows from firms to foreign economies for exports. 
E)  Money flows from households to foreign economies for resources.

Question 13

Using the expenditure approach,"gross private domestic investment" is the sum of:

Accepted Answer

A)  newly produced capital goods. 
B)  fixed investment. 
C)  changes in business inventories. 
D)  all of the above. 
A)  newly produced capital goods. 
B)  fixed investment. 
C)  changes in business inventories. 
D)  all of the above.

Question 14

Exhibit 11-4
  
-Refer to Exhibit 11-4.Measured in terms of Year 1 prices,real GDP is:

Accepted Answer

A)  600. 
B)  750. 
C)  900. 
D)  1,333. 
A)  600. 
B)  750. 
C)  900. 
D)  1,333.

Question 15

Capital goods,like factories and machinery,are classified as intermediate goods.

Accepted Answer

A) True 
 B)False

Question 16

Gross domestic product is a measure of both the:

Accepted Answer

A)  market value of a nation's capital assets (physical capital). 
B)  expenditures on and sales revenues derived from all goods and services exchanged during a period. 
C)  market value of the output produced during a period. 
D)  asset holdings of people and the happiness that they derived from the ownership of those assets. 
A)  market value of a nation's capital assets (physical capital). 
B)  expenditures on and sales revenues derived from all goods and services exchanged during a period. 
C)  market value of the output produced during a period. 
D)  asset holdings of people and the happiness that they derived from the ownership of those assets.

Question 17

Exhibit 11-8 GDP data (billions of dollars)
 $$\begin{array} { | l | r | } 
\hline \text { Indirect business taxes } & \$ 600 \
\hline \text { Depreciation } & 950 \
\hline \text { Change in business inventaries } & 50 \
\hline \text { Compensation of employees } & 5,400 \
\hline \text { Corparate profits } & 700 \
\hline \text { Durable goads } & 600 \
\hline \text { Expurts } & 100 \
\hline \text { Social Security taxes } & 360 \
\hline \text { Transfer payments } & 300 \
\hline \text { Fixed investment } & 950 \
\hline \text { Government 5pending } & 900 \
\hline \text { Imparts } & 150 \
\hline \text { Net interest } & 500 \
\hline \text { Nondurable goods } & 2,000 \
\hline \text { Persanal taxes } & 1,000 \
\hline \text { Rental income } & 200 \
\hline \text { Services } & 4,000 \
\hline
\end{array}$$
-In Exhibit 11-8,and using the expenditures approach,compute personal consumption expenditures.Which of the following is correct?

Accepted Answer

A)  $6,750 billion. 
B)  $6,600 billion. 
C)  $6,550 billion. 
D)  $6,100 billion. 
E)  $5,000 billion. 
A)  $6,750 billion. 
B)  $6,600 billion. 
C)  $6,550 billion. 
D)  $6,100 billion. 
E)  $5,000 billion.

Question 18

Gross domestic product is the sum of the purchase price multiplied by the quantity of:

Accepted Answer

A)  goods and services exchanged during the period. 
B)  final goods and services produced domestically during the period. 
C)  goods and services produced domestically during the period minus the depreciation of productive assets. 
D)  final goods and services plus intermediate goods produced domestically during the period. 
A)  goods and services exchanged during the period. 
B)  final goods and services produced domestically during the period. 
C)  goods and services produced domestically during the period minus the depreciation of productive assets. 
D)  final goods and services plus intermediate goods produced domestically during the period.

Question 19

According to the expenditure approach,the largest component of GDP is:

Accepted Answer

A)  government spending. 
B)  proprietor's income. 
C)  net interest. 
D)  personal consumption expenditures. 
E)  compensation of employees. 
A)  government spending. 
B)  proprietor's income. 
C)  net interest. 
D)  personal consumption expenditures. 
E)  compensation of employees.

Question 20

Consumption spending includes:

Accepted Answer

A)  durable goods, nondurable goods, and housing. 
B)  durable goods, nondurable goods, and imports. 
C)  durable goods, services, and housing. 
D)  durable goods, nondurable goods, and services. 
E)  nondurable goods, services, and housing. 
A)  durable goods, nondurable goods, and housing. 
B)  durable goods, nondurable goods, and imports. 
C)  durable goods, services, and housing. 
D)  durable goods, nondurable goods, and services. 
E)  nondurable goods, services, and housing.

Exam 11: Gross Domestic Product

Which of the following purchases would be counted as a final good in the GDP calculation?

In an economy with persistent inflation,

New residential housing is counted in GDP as a(n):

Disposable personal income:

Which of the following activities would be calculated as part of GDP accounts?

If exports rise and imports fall,then:

Real GDP means GDP:

In the circular flow model,money flows from the business sector to the household sector through the:

Exhibit 11-3 Expenditure approach -As shown in Exhibit 11-3,net exports are:

Which one of the following statements is true in the four-sector circular model?

Using the expenditure approach,"gross private domestic investment" is the sum of:

Exhibit 11-4 -Refer to Exhibit 11-4.Measured in terms of Year 1 prices,real GDP is:

Capital goods,like factories and machinery,are classified as intermediate goods.

Gross domestic product is a measure of both the:

Gross domestic product is the sum of the purchase price multiplied by the quantity of:

According to the expenditure approach,the largest component of GDP is:

Consumption spending includes:

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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